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$200,000 car may drive Diamond verdict

Beau Diamond bought this Lamborghini Gallardo sports car in February 2008 by transferring $200,000 from the bank account of his Diamond Ventures LLC to his personal account at the same bank and then, the same day, wiring $204,000 to One Step Autos.

Published: Friday, July 16, 2010 at 1:00 a.m.

Last Modified: Thursday, July 15, 2010 at 7:36 p.m.

TAMPA - As the government wrapped up its Ponzi scheme case against former currency futures trader Beau Diamond, the sports car he bought using $200,000 of his investors' money became Count 13, "Illegal Monetary Transaction."

Diamond bought the Lamborghini Gallardo sports car in February 2008 by transferring $200,000 from the bank account of his Diamond Ventures LLC to his personal account at the same bank and then, the same day, wiring $204,000 to One Step Autos.

While Diamond's overall alleged scheme to defraud investors is much bigger than that, the car's tangible nature is likely to make that charge the one that draws the attention of jurors who will decide Diamond's fate.

At the end of three and a half days of testimony, the government's last witness was Diane Knott, an Internal Revenue Service special agent in Sarasota. Along with FBI Special Agent Lynn Billings, Knott has spent much of the last year and a half reconstructing Diamond's bank account and brokerage firm transactions, seeing how much money was on hand at any given time, and comparing the real world numbers with what Diamond was telling investors as he sought more and more working capital.

The big picture that emerged was that investors deposited $37.7 million with Diamond, thinking their principal was safe, and that they were getting huge monthly returns from his trading profits.

Investors who asked for withdrawals got them. Diamond sent out $15.2 million in payments during the two and a half years his club operated, from spring 2006 until late 2008.

But his Forex trading accounts, which investigators painstakingly reconstructed, show he deposited $16.8 million in club money in the accounts but was only able to send $1.6 million back to the Diamond Ventures bank account.

The conclusion was inescapable, Knott said: "That $15 million had to be deposits from other investors."

If true, Knott has defined a Ponzi scheme, in which investors are typically offered a high return, but in which any real business activity is dwarfed by the promoter's efforts to attract new money, so that he can keep the pay-outs big.

Several gambling trips that Diamond made to Las Vegas also showed up in the government investigation and testimony.

Count 15 alleges money laundering, also known as illegal monetary transaction, referring to the fact that Diamond transferred $300,000 of club members' money to Destron Inc. That business, as an official of MGM Grand testified Thursday, is a subsidiary of MGM. It is not clear how much of the $300,000 Diamond lost at the tables, but a conservative estimate would be $160,000, documents showed.

Destron was designed "for use of customers who want to send money to MGM Grand who don't necessarily want a casino name affiliated with it," MGM executive Victoria Ryan said.

While not as compelling as a Lamborghini or a gambling junket, a spreadsheet Knott prepared lays out the stark contrast between what investors thought they had on hand and how much Diamond really had.

Adding up the account values Diamond was conveying to investors in mid-2007 shows a total $10.7 million. But the government determined that investors only had $2.7 million to split among them at that point. The Diamond Ventures account contained about $900,000, while all Diamond's active brokerage accounts contained $1.8 million.

The disparity became much greater in 2008, the last year of operation for the club.

Investors stopped getting their high-yield dividend checks in December 2008. Diamond blamed bank and holiday mail issues, and said a trader in his employ had accidentally moved a decimal point and made a bad trade much larger.

If all the investors had pooled their account information at the end of 2008, they would have thought they had $45.8 million. In reality, the brokerage and bank accounts totaled $146,379.

Like other investors, Betsy Robinson of Santa Rosa, Calif., thought she was making a conservative investment when she gave Diamond $250,000. His e-mails assured investors that their principal was safe, and that he was trading conservatively, limiting himself to a 15 percent loss before trading would halt. There would always be a reserve for investors to draw on, he said.

Asked how she came up with the money she wired Diamond in August 2008, Robinson -- who represents one of Diamond's wire fraud counts -- told jurors, "I sold stock out of my Franklin -- my very safe Franklin fund."

It was not long after that that Diamond wrote a reassuring e-mail to Robinson while she was traveling in Peru: "The market is great for us. All of this stuff just causes extra movement in the currencies, which we generally capitalize on. That's what I love about Forex."

Robinson said Diamond also talked in his e-mails "about his Lamborghini, which worried me, and about living in Newport Beach" California.

<p><em>TAMPA</em> - As the government wrapped up its Ponzi scheme case against former currency futures trader Beau Diamond, the sports car he bought using $200,000 of his investors' money became Count 13, "Illegal Monetary Transaction."</p><p>Diamond bought the Lamborghini Gallardo sports car in February 2008 by transferring $200,000 from the bank account of his Diamond Ventures LLC to his personal account at the same bank and then, the same day, wiring $204,000 to One Step Autos.</p><p>While Diamond's overall alleged scheme to defraud investors is much bigger than that, the car's tangible nature is likely to make that charge the one that draws the attention of jurors who will decide Diamond's fate.</p><p>At the end of three and a half days of testimony, the government's last witness was Diane Knott, an Internal Revenue Service special agent in Sarasota. Along with FBI Special Agent Lynn Billings, Knott has spent much of the last year and a half reconstructing Diamond's bank account and brokerage firm transactions, seeing how much money was on hand at any given time, and comparing the real world numbers with what Diamond was telling investors as he sought more and more working capital.</p><p>The big picture that emerged was that investors deposited $37.7 million with Diamond, thinking their principal was safe, and that they were getting huge monthly returns from his trading profits.</p><p>Investors who asked for withdrawals got them. Diamond sent out $15.2 million in payments during the two and a half years his club operated, from spring 2006 until late 2008.</p><p>But his Forex trading accounts, which investigators painstakingly reconstructed, show he deposited $16.8 million in club money in the accounts but was only able to send $1.6 million back to the Diamond Ventures bank account.</p><p>The conclusion was inescapable, Knott said: "That $15 million had to be deposits from other investors."</p><p>If true, Knott has defined a Ponzi scheme, in which investors are typically offered a high return, but in which any real business activity is dwarfed by the promoter's efforts to attract new money, so that he can keep the pay-outs big.</p><p>Several gambling trips that Diamond made to Las Vegas also showed up in the government investigation and testimony.</p><p>Count 15 alleges money laundering, also known as illegal monetary transaction, referring to the fact that Diamond transferred $300,000 of club members' money to Destron Inc. That business, as an official of MGM Grand testified Thursday, is a subsidiary of MGM. It is not clear how much of the $300,000 Diamond lost at the tables, but a conservative estimate would be $160,000, documents showed.</p><p>Destron was designed "for use of customers who want to send money to MGM Grand who don't necessarily want a casino name affiliated with it," MGM executive Victoria Ryan said.</p><p>While not as compelling as a Lamborghini or a gambling junket, a spreadsheet Knott prepared lays out the stark contrast between what investors thought they had on hand and how much Diamond really had.</p><p>Adding up the account values Diamond was conveying to investors in mid-2007 shows a total $10.7 million. But the government determined that investors only had $2.7 million to split among them at that point. The Diamond Ventures account contained about $900,000, while all Diamond's active brokerage accounts contained $1.8 million.</p><p>The disparity became much greater in 2008, the last year of operation for the club.</p><p>Investors stopped getting their high-yield dividend checks in December 2008. Diamond blamed bank and holiday mail issues, and said a trader in his employ had accidentally moved a decimal point and made a bad trade much larger.</p><p>If all the investors had pooled their account information at the end of 2008, they would have thought they had $45.8 million. In reality, the brokerage and bank accounts totaled $146,379.</p><p>Like other investors, Betsy Robinson of Santa Rosa, Calif., thought she was making a conservative investment when she gave Diamond $250,000. His e-mails assured investors that their principal was safe, and that he was trading conservatively, limiting himself to a 15 percent loss before trading would halt. There would always be a reserve for investors to draw on, he said.</p><p>Asked how she came up with the money she wired Diamond in August 2008, Robinson -- who represents one of Diamond's wire fraud counts -- told jurors, "I sold stock out of my Franklin -- my very safe Franklin fund."</p><p>It was not long after that that Diamond wrote a reassuring e-mail to Robinson while she was traveling in Peru: "The market is great for us. All of this stuff just causes extra movement in the currencies, which we generally capitalize on. That's what I love about Forex."</p><p>Robinson said Diamond also talked in his e-mails "about his Lamborghini, which worried me, and about living in Newport Beach" California.</p>